Thread by @StockMarketNerd

$IPOE/@sofi -- the company helping you "get your money right" on the pursuit of financial independence w/a complete suite of tools to:

-- borrow
-- save
-- invest
-- spend

Why @Sofi might just be so fine 🤷‍♂️... a thread 👇

Sofi's products:

a) For B2C:
-- home/personal/student loans & refi (@NerdWallet's personal loan score below)
-- credit
-- banking
-- investing

Targets "high earners not well served" (HENWS)

b) For B2B:
-- API open to enterprise clients (more later)
nerdwallet.com/reviews/loans/…

Sofi aims to:

a) Be a consumer's "one-stop shop" for digital fin services

b) Be the $AMZN/@awscloud of fintech (their comp not mine 🙂)
-- AKA dominate both B2B & B2C fintech landscapes

c) Pass savings from digitization onto users to drive scale

d) Be the "winner take most"

Sofi's edge: (1/3)

a) “Fastest way to do everything"
-- borrow $
-- trade stock (others are as fast)
-- bank
-- bill/transact

b) Quality & quantity of selection -- offerings for all user types
-- unique terms (nothing cookie-cutter)
-- personalized benefits
--❗️GENEROUS rates❗️

Sofi's edge: (2/3)

c) Convenience
-- any time/platform/place

d) Social/financial integration w/Sofi's "home feed"
-- personal feed of fin news/advice
-- added 15% to sales

e) Content
-- education
-- credit score & budgeting
-- remote access to CFPs
sofi.com/learn/content/…

Sofi's edge (3/3) -- summing it up

Full loan stack built w/innovation focus
-- enabled 5 product launches in 1 year
-- enables B2B expansion (more later)

Creates a feedback loop (sorry for the cliché)
-- more iterations
-- lower cost
-- actionable data to feed more improvement

Sofi philosophy -- "Create the fin services productivity loop (FSPL)"

Meaning? It's a land & expand approach:
-- build loyalty w/1st product
-- build products so they're "better together"
-- leverage leading LTV/CAC to fuel growth

Similar to $LMND's insurance playbook.

Cross-selling feeds this loop:

1 money product:
-- $250 revs
-- 34% profit margin
-- $40 CAC

Money + loan product w/cross-selling
-- $2311 revs
-- 80% profit margin
-- $40 CAC

24% of new sales to existing users.

Boosts LTV/CAC.

Justifies more investment in growth.

COVID-19's impact on fin services

a) Greatly accelerated fin-tech app usage (see chart below)

b) 87% of these evolving consumers say they'll stick w/digital banking due to
-- selection
-- service
-- convenience
-- flexibility
-- security
-- less fees

Sofi's industry dynamics:

a) Top 15 banks = 52% legacy acct market share
-- fragmented

b) 50% of us use more than 1 bank
-- 80% of us do so because no 1 bank has everything
-- Sofi is "only one-stop shop for digital financial services" according to the company

Demand looks good:

a) Users are growing -- that is expected

b) More importantly -- user growth has been & is continuing to accelerate
-- positive derivative points to strong momentum

c) Multi-product user base is growing rapidly too

Secret sauce -- Galileo (1/3)

a) 2020 Sofi buys Galileo -- Sofi's B2B arm
-- $1.2B deal

b) Galileo
-- application programming interface (API) for payments & more fin services
-- "enables critical functionality w/an open API"

c) @RobinhoodApp @Chime @RevolutApp built using it

Secret sauce -- Galileo (2/3)

d) This B2B branch of Sofi offers:
-- account set-up/funding
-- direct deposit
-- bill pay
-- transaction notifications
-- point of sale authorization
& so much more

Sofi can also help legacy banks improve tech stacks w/Galileo -- win win

Secret sauce -- Galileo (3/3)

e) Galileo allows Sofi to
-- fuel direct deposit relationships
-- offer products to 50M new users
-- expand into new products & countries

f) Galileo owns 1/6 of Apex Clearing -- digital clearing house API

g) Galileo demand is accelerating 👍👇

Financial forecasts -- NOT certain

2020:
-- revs up 38% to $621M
-- -11% adj EBITDA margin
-- -35.4% GAAP NI margin

2021:
-- revs up 57% to $980M
-- 2.7% adj EBITDA margin
-- -24.2% GAAP NI margin

2025:
-- 43% rev CAGR to $3.67B
-- 32% adj EBITDA margin
-- 17.3% GAAP NI margin

SPAC deal:

a) Shares
-- 865.1M shares
-- 28.1M shares in warrants
-- 122.5M share PIPE
-- 80.5M IPOE shares
= ~1.1B shares

b) $
-- $1.9B on hand

c) valuation @ $19/share
= $20.9B cap - $1.9B in cash
= $19B fully diluted EV

d) 39X fully diluted EV/2023 EBITDA

A boost to operations:

In October 2020, Sofi was granted preliminary approval for a U.S. bank charter

This will enable:
-- a lower cost of capital
-- more net interest margin from longer loan holding periods
-- a boost to lending growth

👍

Summarizing Sofi's 3 rev streams:

1) Fin Services (digital banking)
-- 153% CAGR to 2025
-- "on path to profitability"

2) Lending (most mature segment)
-- 25% CAGR to 2025
-- 58% contribution margin

3) Tech platform (B2B, Galileo)
-- 55% CAGR to 2025
-- 62% contribution margin

Management: (1/3)

a) CEO Anthony Noto (NOT a founder)
-- COO & CFO $TWTR
-- co-head of TMT $GS
-- CFO @NFL
-- West Point grad

b) CFO Chris Lapointe
-- head of corporate FP&A $UBER
-- VP of TMT $GS

c) Head of product Assaf Ronen
-- VP of Voice @ $AMZN
-- GM @ $MSFT

Management: (2/3)
d) CMO Lauren Webb
-- marketing VP $INTU
-- brand manager $PG

e) Head of ops Micah Heavener
-- managing director $C
-- Infantry Captain in the US Army

f) Head of people Anna Avalos
-- Former HR leader $TSLA
-- Director of human resources $SYK

Management: (3/3)

g) CEO/co-founder Mike Cagney stepped down in 2017 amid sexual harassment allegations
-- obviously never good
-- why Noto & his team's sparkling resumes are vital
-- bloomberg.com/news/articles/…

h) @Glassdoor ratings are pretty average
-- glassdoor.com/Reviews/SoFi-R…

Risks:

a) Crowded
-- fintech entrants abundant

b) Estimating a big growth boost -- not certain & needs to happen

c) $SQ $PYPL
-- could offer everything Sofi does
-- larger user bases

d) Rates
-- NIM compression if yield curve flattens
-- rate hikes = lower loan affordability

Chamath's Investor call notes:

-- "churn better than any other fintech we met"
-- 90% of new neobank accts run on Sofi tech
-- modern tech stack enables B2B expansion like $AMZN w/AWS -- that's his game changer
-- complete suite of products stands out among individual solutions

Noto's Investor call notes:

-- "better economics than any other DTC tech company I have seen"
-- Galileo acquisition improves economics of Sofi's money product by 20%
-- will soon launch social portfolios so users can invest w/people on the platform they follow

Plan:

I love the products from experience & the path/mgmt from digging in.

Will start a SMALL position tomorrow.

The forecasted boost in growth MUST happen. If it doesn't occur I'll be out & posting a swing & miss gif.

Leash is shorter on this one.

Will be long @Sofi